China Stocks Fall for First Time in Five Days Before NPC Meeting

March 4 (Bloomberg) -- China’s stocks fell, halting the
benchmark index’s longest stretch of gains in three weeks,
before the start of an annual policy-setting meeting tomorrow.

China Citic Bank Corp. slumped 2 percent to drag down
smaller lenders as money-market rates jumped the most in six
weeks. Neusoft Corp. slid 6.3 percent as a gauge of technology
companies dropped the most among industry groups. China Vanke
Co. led a rally for property developers after it got regulatory
approval to convert its B shares into Hong Kong-traded stocks.

The Shanghai Composite Index slipped 0.2 percent to
2,071.47 at the close, halting a gain of 2 percent in the
previous four days. Investors will be watching the meeting of
the National People’s Congress for clues to the next steps to
fix local-government finances, charge market prices for natural
resources, rein in shadow-banking risks, free up deposit rates
and open up state businesses to private investment.

“The market is waiting for signals that will come from the
NPC such as the economic-growth target and policies on real
estate,” said Dai Ming, a fund manager at Hengsheng Hongding
Asset Management Co. “Russia and Ukraine have some
implications, but not that big. The decline is due to China’s
internal problems like slowing growth.”

The Shanghai Composite pared losses of as much as 1.2
percent. President Vladimir Putin ordered soldiers in western
Russia to return to their bases by the end of the week after
military exercises ended on schedule. Investors see the news
signaling a reduced likelihood of military hostilities breaking
out in Ukraine’s Crimea region, said Tim Condon, head of Asia
research at ING Groep NV.

NPC Meeting

The latest meeting of China’s legislature, the first to be
overseen by President Xi Jinping and Premier Li Keqiang, comes
as leaders pledge to give markets a “decisive” role in the
economy. The Communist Party leadership faces a dilemma over
where to set a growth goal for 2014 as they wrestle with
sustaining expansion while limiting debt risks, environmental
damage and social unrest.

The growth target, set at 7.5 percent last year, will be
announced at the NPC meeting. In a Bloomberg News survey, 63
percent of economists predict the same number this year, while
33 percent see either a 7 percent goal or a range, such as 7
percent to 7.5 percent.

The seven-day repurchase rate, a gauge of funding
availability, jumped 68 basis points, or 0.68 percentage point,
to 3.51 percent, according to a fixing published by the National
Interbank Funding Center. That’s the biggest increase since Jan.
20.

The Shanghai Composite has fallen 2.1 percent this year,
dragging down its multiple to 7.9 times 12-month projected
earnings, compared with the five-year average of 12.2, according
to data compiled by Bloomberg. Trading volumes in the index were
11 percent above the 30-day average for this time of day,
according to data compiled by Bloomberg.

Ukraine Tension

China’s Foreign Minister Wang Yi held a telephone
conversation with his Russian counterpart Sergei Lavrov to
discuss the Ukraine situation, according to a statement on the
Chinese government’s website yesterday. China and Russia share a
view that the proper handling of the Ukraine crisis is important
to maintaining regional peace and stability, it said.

Crimea, where ethnic Russians comprise the majority, has
become the focal point of Ukraine’s crisis after an uprising
triggered last month’s ouster of President Viktor Yanukovych.
Ukraine has mobilized its army and called for foreign observers
after Russian forces took control of the peninsula.